30th Jan 2014 09:59
LONDON (Alliance News) - Public Service Properties Investments Ltd Thursday became one of the biggest fallers on AIM, as it said the value of its investment portfolio decreased by 14%.
The European real estate investment and financing company said its UK portfolio was valued at GBP37.7 million at December 31, 2013, compared with GBP47.3 million in 2012, while its German portfolio decreased 8.3% in constant currency to GBP34.4 million from GBP37.5 million a year earlier.
Public Service Properties blamed the decline in the UK on an increase in the average Capitalisation Rate to 10.6% at December 31, 2013 from 8.3% at December 31, 2012. Individual capitalisation rates varied between 7.0% and 22.5%, it said.
Capitalisation rate is the ratio between the net operating income produced by an asset and its capital cost - the original price paid to buy the asset - or alternatively its current market value.
The group's UK tenant, European Care Group (ECG) saw average occupancy of the group's UK investment properties decline to 82.5% of available beds at December 31 from 89.8% of available beds a year before.
European Care Group is a health and social care business, providing residential, educational and supported living services which enable people to live as independently as possible.
ECG reported a decline of approximately 25% in the operating profit, before rent, across the Public Services' portfolio for the year compared to the preceding period.
Part of the decline in valuation related to properties where the tenant is in the process of resolving operational issues, and ECG has stated that it is optimistic that overall performance of these properties will improve.
In Germany, the decline in the value of the investment portfolio reflected an increase in the average Capitalisation Rate to 8.5% at December 31, 2013 from 7.8% at December 31, 2012 Individual capitalisation rates varied between 7.5% and 12.2% at 31 December 2013, Public Service Properties added.
Overall, the group said its portfolio remains fully let, and all rental income continues to be paid when due.
Public Service Properties expects UK rental and finance lease income, currently at GBP4.9 million a year, to increase in February by the annual increase in the retail price index at the end of January.
Rental income in Germany in 2014 is expected to be at comparable levels, in euros, to income received in 2013.
Despite the challenging year, Public Service Properties said it remains upbeat, having made significant progress in stabilising its trading position throughout 2013 with the completion of asset disposals in Germany and the US.
"These disposals resulted in reducing leverage which remains an important focus for the board over the medium term," Chairman Patrick Hall said in a statement.
"The company agreed revisions to the terms of the agreement with the asset manager eliminating the long notice period in exchange for a six monthly revolving engagement and agreed a reduction in the asset management fee from 1.5% to 0.85% of net assets," he added.
The stock was trading at 25.00 pence Thursday, down 5.62 pence or 18%, making it one of the biggest fallers on AIM.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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